FM’s speech on Supplementary Demands for Grants, 2009-10
Following is the text of speech made by the Finance Minister Shri Pranab Mukherjee relating to the First Batch of Supplementary Demands for Grants, 2009-10 (December, 2009) in Lok Sabha today:
“The First Supplementary Demands for Grants for the year 2009-10 has been presented in the following background.
In order to minimize the adverse impact of global meltdown on Indian economy, the Government took a conscious decision of continuing with the policy of providing fiscal stimulus and presented the Budget 2009-10 with fiscal deficit of 6.8 per cent of GDP. Overall financial performance in the first half of the fiscal year 2009-10 is in line with the Budget Estimates presented in July 2009. At the same time, impact of these stimuli have started showing results with the economy recording 7 per cent growth in the first half of 2009-10.
Gross Tax Revenue
Reduced rates of taxes/duties were continued in the Budget 2009-10 to counter the adverse effects of economic slowdown. Along with new budget proposals on Direct and Indirect taxes, the gross tax to GDP ratio was estimated at 10.9 per cent in BE 2009-10 as against gross tax to GDP ratio of 11.5 per cent in 2008-09 (Provisional Accounts). In absolute terms gross tax revenue in BE 2009-10 was estimated at Rs.6,41,079.34 crore. This reflects growth of 5.1 per cent over gross tax receipts of 2008-09. However, the gross tax revenue collection upto October 2009 shows a decline of 7.5 per cent over the same period in 2008. This is primarily attributed to steep decline in indirect tax components, namely, Union Excise Duties and Customs. (It has to be noted here that in 2008-09, the indirect tax rates were higher during this period). However, the likely shortfall in indirect tax components is expected to be compensated with higher collection in direct tax components in 2009-10.
Plan Expenditure
Plan Expenditure during 2009-10 is estimated at Rs.3,25,149 crore reflecting a growth of 18 per cent over the provisional actuals of 2008-09. (This is 33.6 per cent over BE 2008-09). Plan expenditure of Rs.1,48,024 crore during April-October, 2009 accounts for 45.5 per cent of BE 2009-10 and reflects a growth of 23.6 per cent over the previous year plan expenditure during the same period. Considering the fact that the Budget was presented only in July 2009 and plan outlay is at historical high of 5.6 per cent of GDP, this shows good pace of plan expenditure.
Non Plan Expenditure
Non-plan expenditure is estimated in B.E.2009-10 at Rs.6,95,689 crore which constitutes 68.1 per cent of total expenditure during 2009-10 and reflects growth of 14.8 per cent over the non-plan expenditure in 2008-09. The Non-plan expenditure for the period April-October has increased from Rs.2,88,657 crore in 2008 to Rs.3,88,837 crore in 2009 reflecting growth of 34.7 per cent. This accounts for 55.9 per cent of the estimated non plan expenditure in BE 2009-10. The higher rate of growth in non-plan expenditure is primarily on account of increase in salary and pension related expenditure due to the implementation of Sixth Central Pay Commission recommendations; increase in food and fertiliser subsidy and expenditure on account of Agricultural Debt Waiver and Debt Relief Scheme for farmers.
Major subsidies, accounted for under non-plan expenditure, have shown higher outgo during April-October of the current financial year when compared to the same period during the previous financial year. The outgo on food subsidy, for example, has increased from Rs.28,673 crore to Rs. 44,550 crore reflecting a growth of 55.4 per cent. Another non discretionary item, namely, pension has also shown higher outgo of Rs.25,402 crore during this period of the current financial year showing a increase of 67.7 per cent over the corresponding period of the previous year. Similarly, the increase in salary related expenditure is of the order of 51.2 per cent. This is on account of implementation of 6th Central Pay Commission recommendations. In the latter half of the current fiscal year, rate of growth of salary and pension related expenditure would moderate due to the base effect.
Position on Borrowings:
The net market borrowing requirement of the Government for the fiscal 2009-10, through market loans (issue of dated securities) is budgeted at Rs. 3,97,957 crore. Inclusive of repayments amounting to Rs.53,136 crore, the gross issuance of dated securities for the fiscal year works out to Rs. 4,51,093 crore. After adjusting the budgeted de-sequestering of MSS cash balance amounting to Rs. 33,000 crore, the budgeted issuance of dated securities to the market (through auctions) for the fiscal 2009-10 accordingly, works out to Rs. 4,18,000 crore. As against the above, dated securities amounting to Rs. 3,64,000 crore have been issued till December 4th, 2009, accounting for 87% of the gross borrowings.
Even though the gross borrowings have increased by about 65% over last year’s actuals, this has been carried out in a non-disruptive manner. The government borrowings were front loaded in the first half of the fiscal year, to ensure that there was adequate space for the private sector in the second half, when their demand would pick up. The weighted average cost of borrowings is also lower at 7.19% as against 8.51 per cent in the corresponding period of the previous fiscal.
Despite the higher market borrowing of the Government in the current year, there is ample liquidity in the system and RBI has been absorbing around Rs.1,16,000 crore per day, on average, in the current fiscal year (upto 7th December, 2009) through reverse repo transactions.
Supplementary Proposals:
In the above background I have presented before the House the Demands for the First Batch of Supplementary Grants in 2009-10. This Supplementary proposal includes 61 Grants and 2 Appropriations. Authorisation is being sought for gross additional expenditure of Rs. 30,942.62 crore of which Cash Outgo is proposed for Rs. 25,725.22 crore (including provision of Rs.3139.90 crore for transfer of the disinvestment receipts already received in the Consolidated Fund of India as Non Debt Capital receipt to the National Investment Fund). Apart from this the other proposals involve Technical Supplementaries of Rs. 5,216.67 crore, and Token Supplementaries of Rs. 0.73 crore. The proposals involving Token and Technical supplementaries are to be met from savings or enhanced receipts/recoveries and will not result in cash additionality.
The main items or the purposes for which I have provided cash additionality in the First Batch of Supplementary Demands for 2009-10 include-
· Rs.242.10 crore for the purchase of Uranium for the Nuclear Fuel Complex and purchase of raw materials by Bhabha Atomic Research Centre and other units;
· Rs.249.70 crore for equity investment in Bhartiya Nabhikiya Vidyut Nigam Limited;
· Rs.3000.00 crore for additional subsidy requirements relating to imported decontrolled fertilizers and indigenous Urea;
· Rs.800.00 crore for equity infusion in the National Aviation Company of India Limited (i.e. Air India);
· Rs.249.24 crore for meeting additional requirement towards payment of pensions in the Department of Telecommunications;
· Rs.171.75 crore for meeting additional requirements on Optical Fibre Cable based Network for Defence Services;
· Rs.3458.98 crore for Food Subsidies including payment of bonus on minimum support price and payment to State Governments on decentralized procurement of food grains;
· Rs.2210.00 crore for additional requirements relating to Defence Pensions;
· Rs.1200.00 crore as additional provision for the National Calamity Contingency Fund;
· Rs.4533.33 crore towards additional expenditure on Civil Pensions/Family Pension and other retirement benefits;
· Rs.3139.90 crore for transfer of disinvestment receipts to National Investment Fund (NIF) for expenditure in respect of identified Social Sector schemes. [An equivalent amount has been received as Disinvestment proceeds in the receipt side];
· Rs.499.91 crore for reimbursement of losses to Cotton Corporation of India on account of MSP operation on cotton;
· Rs.404.55 crore for meeting additional expenditure on projects undertaken by Delhi Development Authority in connection with Commonwealth Games-2010;
· Rs.350.00 crore for equity contribution to Delhi Metro Rail Corporation (DMRC);
· Rs.1675.00 crore for providing loan as Pass Through Assistance to (i) DMRC (Rs. 1500 crore), (ii) Bangalore Metro (Rs. 135 crore) and (c ) Chennai Metro (Rs. 40 crore);
· Rs. 1200.00 crore for meeting additional requirements under Integrated Child Development Services (ICDS) Scheme;
· Rs.350.58 crore for Loans and Advances to Organizing Committee for the Commonwealth Games, 2010;
· Rs.268.00 crore for other Commonwealth Games related expenditure viz. re-creation of playing facilities, preparation of teams, up-gradation/creation of venue for Commonwealth Games, incremental infrastructure in MTNL for providing connectivity to High Definition TV and Integrated Security Solution; and
· Rs.135.00 crore for carrying out BPL Survey including its administrative expenditure.
If the cash additionality of Rs. 3139.90 crore sought for Transfer to the National Investment Fund is excluded, for which an equivalent amount has already been received as Non Debt Capital Receipt, the proposals involving net cash outgo will amount to Rs. 22,585.92 crore, or 2.21% of the total Plan + Non Plan expenditure provision in BE 2009-10. Even this additionality, is not expected to result in any significant variation from the Budget Estimates of Plan and Non-Plan expenditure in 2009-2010, as there would be equivalent overall savings in other Grants. The total expenditure for 2009-2010 (including Railways) is therefore, expected to remain within the Budget Estimates 2009-2010 of Rs. 10,20,838 crore.
With the prevailing trends in receipts and expenditure, coupled with better than expected performance of the economy during the second quarter of 2009-10, it is expected that the fiscal deficit will remain within the estimate of 6.8% presented in the Budget in July 2009.”
